NUCOR CORP 10-Q Summary: Quarter Ended June 29, 2002
Business Context and Reporting Period
This Form 10-Q covers the second quarter and first six months ended June 29, 2002. Nucor Corporation is a leading steel producer reporting record tonnage for steel production and shipments to outside customers during the period. The company operates with a simple capital structure and no off-balance sheet financing arrangements.
Key Financial Metrics
| Metric | Q2 2002 (3 Months) | Q2 2001 (3 Months) | YTD 2002 (6 Months) | YTD 2001 (6 Months) |
|---|---|---|---|---|
| Net Sales | $1,141.7M | $1,078.6M | $2,169.8M | $2,106.6M |
| Net Earnings | $59.7M | $33.3M | $80.0M | $66.0M |
| Diluted EPS | $0.76 | $0.43 | $1.02 | $0.85 |
| Operating Cash Flow | N/A | N/A | $303.7M | $239.3M |
| Capital Expenditures | N/A | N/A | ($76.5M) | ($126.1M) |
| Cash and Short-Term Investments | $537.6M (End of Period) | N/A | N/A | N/A |
| Long-Term Debt | $458.6M (End of Period) | N/A | N/A | N/A |
| Current Ratio | 2.5 (End of Period) | N/A | N/A | N/A |
Margins: Gross margins were approximately 9% for Q2 2002 and 8% for the first half of 2002. The effective tax rate was 34.5% for the period.
Material Changes vs. Prior Period
- Revenue Growth: Q2 net sales increased 6% year-over-year, driven by a 5% increase in tons shipped. YTD sales increased 3% due to a 7% volume increase, despite a 4% decrease in composite sales price per ton ($325 vs. $339).
- Profitability: Net earnings for Q2 increased significantly, aided by a $29.9M one-time gain from a graphite electrodes anti-trust settlement. Without this item, earnings growth would have been driven primarily by volume.
- Costs: Raw material costs increased 3% in Q2 but decreased 1% YTD. Profit sharing costs rose 78% in Q2 and 20% YTD, fluctuating with pre-tax earnings.
- Balance Sheet: Cash and short-term investments increased to $537.6M from $462.3M at year-end 2001. Long-term debt remained stable at approximately $458.6M.
Outlook, Risks, and Unusual Items
- Unusual Items: The company recognized $29.9M in other income from an anti-trust settlement in Q2 2002.
- Acquisitions:
- Birmingham Steel: Signed a definitive agreement in May 2002 to acquire assets for $615M in cash. Closing is expected in Q4 2002 pending bankruptcy court approval.
- Trico Steel: Closed on July 22, 2002, purchasing assets for $116.7M, assuming $86M in debt. This adds approximately 1.9M tons of annual sheet capacity.
- Capital Allocation: Capital expenditures are projected to be under $200M for 2002. The board approved a repurchase program for up to 15M shares, though no repurchases occurred in the first half of 2002.
- Risks: Key risks include raw material supply and cost (steel scrap), energy costs, competitive pricing pressure, global economic uncertainty, and trade policies. Environmental compliance costs are accrued at $87.9M.
Investor Verification Checklist
- Verify the impact of the $29.9M anti-trust settlement on normalized earnings.
- Monitor the closing timeline and regulatory approvals for the $615M Birmingham Steel acquisition.
- Assess the integration and start-up timeline for the Trico Steel facility to realize the 30% capacity increase.
- Track raw material (scrap) costs and their correlation with future gross margins.
- Review the status of the $87.9M accrued environmental liabilities and ongoing consent decree requirements.